J.P. Morgan Probes
Real-Estate Pacts

J.P. Morgan Chase & Co. is examining whether a former top real-estate executive, Michael Weinberg, a longtime associate of bank President James Dimon, engaged in any wrongdoing in the awarding of construction contracts, according to people involved in the matter.

The inquiry, conducted by the New York law firm Paul, Hastings, Janofsky & Walker LLP, is looking at Mr. Weinberg's relationship with vendors including J.T. Magen & Co., a New York construction company that did work for the bank and also on Mr. Weinberg's personal apartment. The review will likely be concluded within a few weeks, according to a person familiar with the situation.

Joseph Evangelisti, a spokesman for J.P. Morgan, says that when "issues were raised concerning our contracting practices, senior management launched a thorough independent review and is taking swift and appropriate action."

Mr. Weinberg's relationship with J.T. Magen is under scrutiny at the same time that Manhattan District Attorney Robert Morgenthau's office is investigating whether J.T. Magen gave kickbacks to a former official at Citigroup Inc., according to people familiar with that inquiry. The Manhattan district attorney's office declined to comment. A Citigroup spokeswoman says: "As a victim of any alleged unlawful activity, we have been cooperating fully with the authorities." J.T. Magen didn't respond to requests for comment.

J.P. Morgan, the U.S.'s second-largest bank after Citigroup by assets, fired Mr. Weinberg in January. A person familiar with the bank's rationale says the bank had become dissatisfied with the way he was handling contracts.

Robert Forman, a lawyer representing Mr. Weinberg, declined to discuss reasons for his termination, but said Mr. Weinberg is cooperating with the bank's investigation. "Mr. Weinberg categorically denies that he engaged in any improprieties or received any improper personal gain while at Bank One or J.P. Morgan Chase," Mr. Forman said.

As for Mr. Weinberg's apartment, Mr. Forman says J.T. Magen was the only contractor authorized to work in the building at the time and that Mr. Weinberg believes he paid fair-market rates for the work.

Mr. Weinberg is a Wall Street veteran who helped choose sites for new bank branches, hired contractors to renovate bank facilities and chose the firms that built large bank projects.

Mr. Weinberg's ties to Mr. Dimon have raised questions about the J.P. Morgan president's oversight of Mr. Weinberg's activities at J.P. Morgan -- as well as at Citigroup and Bank One, where both men also worked. Their relationship dates back about 20 years. Both were close friends with former Citigroup Chief Executive Sanford Weill; Mr. Dimon had been Mr. Weill's protégé, but left after losing out in a Citigroup succession race in 1998. Two years later, he took over as chief executive at Chicago-based Bank One, later hiring Mr. Weinberg as a senior vice president in charge of real estate.

In 2002, the Federal Bureau of Investigation forwarded to Bank One an anonymous tip it had received alleging that Mr. Weinberg "may have engaged in illegal acts" by awarding contracts "outside the competitive bid process" and "regardless of price," according to a Bank One memo reviewed by The Wall Street Journal.

An internal Bank One investigation cleared Mr. Weinberg of wrongdoing but found that he had awarded contracts to J.T. Magen and other suppliers without competitive bidding, according to the 2002 memo. Written by Jim Beveridge, head of corporate security for Bank One, the memo recommended that the department set up an "independent support group" to promote competitive bidding and establish clear standards. Mr. Beveridge didn't return a call seeking comment.

Mr. Weinberg wasn't aware of any such inquiry or recommendations, says his lawyer, Mr. Forman. Mr. Dimon ordered the investigation, according to a person familiar with the matter.

After J.P. Morgan bought Bank One last year, Mr. Weinberg was named head of U.S. real estate at the combined company. Soon thereafter, questions arose internally about the rising cost of construction for two Delaware data centers. A "budget review" prepared for the bank by New York project-management firm Quartararo & Associates, which was reviewed by the Journal, says the "budget overage" at the two data centers totaled $147 million.

The bank then asked Thacher Associates, a New York firm that investigates corporate fraud, to pursue the Quartararo report and some other internal complaints about Mr. Weinberg.

The internal investigators found a backdated waiver for a $150 million project, according to Dora Putnam, the former employee who prepared it. Ms. Putnam says she prepared the waiver in 2004 to justify Mr. Weinberg's choice of J.T. Magen as construction manager for Bank One Plaza in early 2003, and that Mr. Weinberg signed it after she told him of her plan to backdate it.

Mr. Weinberg's attorney says Ms. Putnam chose J.T. Magen and that when Mr. Weinberg signed the bid waiver he was unaware that Ms. Putnam was going to backdate it.

Ms. Putnam says bank auditors questioned her about the backdated waiver in a Dec. 7, 2004 meeting. She says she was asked to leave the bank that day and was terminated at the end of January.

Since Mr. Weinberg was fired, two executives who oversaw the construction of the Delaware data centers also have been terminated. Earlier this year, J.P. Morgan's audit committee hired the Paul, Hastings law firm to investigate the situation.

-- Jesse Drucker contributed to this article.

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